Determining appropriate inventory levels is one of the most important and most challenging tasks faced by operations managers. If you carry too much inventory, you tie up money in working capital; if you don’t carry enough inventory, you face stock outs and reduced service levels.
What is Safety Stock?
Safety stock is defined as inventory that is carried to prevent stock outs and back order situations. Stock outs stem from factors such as fluctuating customer demand, forecast inaccuracy, and variability in supplier lead times. Many companies look at their own demand fluctuations and assume that there is not enough consistency to predict future variability.
What will your learn?
This white paper covers the different methods for calculating safety stock and strategies for finding the right balance between inventory costs and customer service levels.
White Paper Topics Include:
- The basics of safety stock management
- Why should companies carry safety stock
- Methods of calculating safety stock
- Calculation equations & examples
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